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Fixed Effects Estimation of Structural Parameters and Marginal Effects in Panel Probit Models

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Author Info
Ivan Fernandez-Val () (Department of Economics, Boston University)

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Abstract

Fixed effects estimators of nonlinear panel models can be severely biased due to the incidental parameters problem. In this paper I find that the most important component of this incidental parameters bias for probit fixed effects estimators of index coefficients is proportional to the true value of these coe±cients, using a large-T expansion of the bias. This result allows me to derive a lower bound for this bias, and to show that fixed effects estimates of ratios of coefficients and average marginal effects have zero bias in the absence of heterogeneity, and have negligible bias relative to their true values for a wide variety of distributions of regressors and individual effects. New bias corrected estimators for index coefficients and marginal effects with improved finite sample properties are also proposed for static and dynamic probit, logit, and linear probability models with predetermined regressors.

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File URL: http://people.bu.edu/ivanf/wp_files/panelprobit_feb10_2007.pdf
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Publisher Info
Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2007-009.

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Length: 44 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:bos:wpaper:wp2007-009

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Related research
Keywords: Panel data; Bias; Discrete Choice Models; Probit; Fixed effects; Labor Force Participation.;

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
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    Other versions:
  4. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Levine's Bibliography 122247000000001061, UCLA Department of Economics. [Downloadable!]
  5. Faruk Gul & Wolfgang Pesendorfer, 2005. "The Revealed Preference Theory of Changing Tastes," Review of Economic Studies, Blackwell Publishing, vol. 72(2), pages 429-448, 04. [Downloadable!] (restricted)
  6. John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434. [Downloadable!] (restricted)
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  8. Peleg, Bezalel & Yaari, Menahem E, 1973. "On the Existence of a Consistent Course of Action when Tastes are Changing," Review of Economic Studies, Blackwell Publishing, vol. 40(3), pages 391-401, July. [Downloadable!] (restricted)
  9. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February. [Downloadable!] (restricted)
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  12. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  13. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Boston University - Department of Economics - Working Papers Series WP2006-021, Boston University - Department of Economics. [Downloadable!]
  14. Jawwad Noor, 2005. "Commitment and Self-Control," Microeconomics 0509008, EconWPA. [Downloadable!]
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rubén Segura-Cayuela & Josep M. Vilarrubia, 2008. "The effect of foreign service on trade volumes and trade partners," Banco de España Working Papers 0808, Banco de España. [Downloadable!]
  2. Rocha, Romero & Soares, Rodrigo R., 2009. "Evaluating the Impact of Community-Based Health Interventions: Evidence from Brazil's Family Health Program," IZA Discussion Papers 4119, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Jose Apesteguia & Ignacio Palacios-Huerta, 2008. "Psychological Pressure in Competitive Environments: Evidence from a Randomized Natural Experiment," Economics Working Papers 1116, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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